"Can the theories that Alfred D. Chandler developed in his book 'Scale and Scope: The dynamics of industrial capitalism' be applied to patterns of economic growth in the second half of the 20th century?"

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Introduction

TABLE OF CONTENTS 1. Introduction 1 2. Chandler's theory 1 3. Methodology and selection of study objects 3 4. Description of developments 4 Country level 4 Industry level 5 Firm level 6 5. Compare these patterns to Chandler's predictions 6 Country level 6 Industry and firm level 8 6. Future growth industries 9 7. Conclusion 10 Reference List 11 Appendix A - 900 largest German firms 12 Appendix B - Growth industries in the USA 16 Appendix C - selected GDPs in 1950 17 1. INTRODUCTION "Scale and Scope: The dynamics of industrial capitalism" (henceforth Scale and Scope) by Alfred D. Chandler (1990) is one of the central books in economic history. Like only few books, it explains many economic developments in the period from the 1880s until deep into the 20th century. By focusing on this period, the period of the so-called second industrial revolution, Chandler investigates a period with immense changes in business and economic environment. Therefore, even though the period is time wise relatively narrow, it still provides enough evidence to develop strong theories. The book develops theories that have a strong explanatory power for the period under review. Because the book does not scrutinize events and developments that occurred in the times that followed, one might naturally wonder in how far the ideas developed by Chandler can be transferred into our post-modern time and in how far they are able to explain more recent developments. This is exactly what this paper will aim at. The question it is trying to answer it thus: "Can the theories that Alfred D. Chandler developed in his book 'Scale and Scope: The dynamics of industrial capitalism' be applied to patterns of economic growth in the second half of the 20th century?" In studying this question, this paper will use a methodology that is very similar to the one employed by Chandler himself. First of all, the main ideas of Chandler will be summarized to provide a benchmark against which the further findings of the paper can be evaluated. ...read more.

Middle

The second fact, namely the rise of some nations in South-East Asia needs some closer consideration. From 1950 until today, the Japanese per capita GDP increased almost 15-fold and the South Korean more than 21-fold.(www.nationmaster.com) Compared to that, European growth looks insignificant, as for example the one of Germany that could increase its per capita GDP about 6-fold. While this sheer explosion of economic power has puzzled many, one convincing explanation can be drawn from Chandler's theories. The nations of Western Europe and North America owe their unique economic position to a large extend to the investments made in the second industrial revolution. However, after World War Two, the economic environment started to change once again. New technologies were developed that allowed significant increases in productivity. The large industrial firms that had emerged in the Western nations however, were slow to react to this and thus, Asian firms were able to fill the gap and grasp the benefits. Especially Japanese firms developed a number of management innovations that strengthened the resources of organizational capabilities with concepts like the famous Just in Time (JIT) production lead to an advantages over many Western companies that still tried to manage with methods form the past (Mehtabdin, R.K.,1986.). The story of the rise of Japan and the tiger states can thus be seen as confirming Chandler's idea that organizational capabilities are crucial for firms and thus for economic growth. A final point that has to be mentioned when one compares the analysis of Chandler to the world as it evolved in the last half century and that has especially been discussed in the light of the rise of the Japanese economy relative to the established industrialized countries is the role of research and development. Many (e.g. Mehtabdin, R.K.,1986) saw as a reason for the failing of the Americans to keep the Japanese out of 'their' industries that they failed to invest in research and development because of their short-term orientation. ...read more.

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